Reading 41: Discounted Dividend Valuation- LOS c～ Q1-6 required, holding, periods, return

wzaina

 

LOS c: Calculate the value of a common stock using the DDM for one-, two-, and multiple-period holding periods.

Q1. JAD just paid a dividend of $0.80. Analysts expect dividends to grow at 25% in the next two years, 15% in years three and four, and 8% for year five and after. The market required rate of return is 10%, and Treasury bills are yielding 4%. JAD has a beta of 1.4. The estimated current price of JAD is closest to:

A)   $45.91.

B)   $29.34.

C)   $25.42.

 

 

Q2. An investor projects that a firm will pay a dividend of $1.25 next year, $1.35 the second year, and $1.45 the third year. At the end of the third year, she expects the asset to be priced at $36.50. If the required return is 12%, what is the current value of the shares?

A)   $32.78.

B)   $29.21.

C)   $31.16.

 

Q3. An investor projects that a firm will pay a dividend of $1.00 next year and $1.20 the following year. At the end of the second year, the expected price of the shares is $22.00. If the required return is 14%, what is the current value of the firm’s shares?

A)   $18.73.

B)   $15.65.

C)   $19.34.

 

Q4. If a stock expects to pay dividends of $2.30 per share next year, what is the value of the stock if the required rate of return is 12% and the expected growth rate in dividends is 4%?

A)   $28.75.

B)   $29.90.

C)   $19.17.

 

Q5. An analyst has compiled the following financial data for ABC, Inc.

ABC, Inc. Valuation Scenarios
Item	Scenario 1	Scenario 2	Scenario 3	Scenario 4
Year 0 Dividends per Share	$1.50	$1.50	$1.50	$1.50
Long-term Treasury Bond Rate	4.0%	4.0%	5.0%	5.0%
Expected Return on the S& 500	12.0%	12.0%	12.0%	12.0%
Beta	1.4	1.4	1.4	1.4
g (growth rate in dividends)	0.0%	3.0%	Years 1-3, g=12.0% After Year 3, g=3.0%	Year 1, g=20% Year 2, g=18% Year 3, g=16% Year 4, g=9% Year 5, g=8% Year 6, g=7% After Year 6, g=4%

What is the value of ABC, Inc.'s stock price using the assumptions contained in Scenario 4?

A)   $26.66.

B)   $22.22.

C)   $18.52.

 

Q6. Deployment Specialists pays a current (annual) dividend of $1.00 and is expected to grow at 20% for two years and then at 4% thereafter. If the required return for Deployment Specialists is 8.5%, the current value of Deployment Specialists is closest to:

A)   $33.28.

B)   $28.27.

C)   $30.60.

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QUOTE:

以下是引用wzaina在2009-3-6 15:52:00的发言：
 

LOS c: Calculate the value of a common stock using the DDM for one-, two-, and multiple-period holding periods.

Q1. JAD just paid a dividend of $0.80. Analysts expect dividends to grow at 25% in the next two years, 15% in years three and four, and 8% for year five and after. The market required rate of return is 10%, and Treasury bills are yielding 4%. JAD has a beta of 1.4. The estimated current price of JAD is closest to:

A)   $45.91.

B)   $29.34.

C)   $25.42.

 

 

Q2. An investor projects that a firm will pay a dividend of $1.25 next year, $1.35 the second year, and $1.45 the third year. At the end of the third year, she expects the asset to be priced at $36.50. If the required return is 12%, what is the current value of the shares?

A)   $32.78.

B)   $29.21.

C)   $31.16.

 

Q3. An investor projects that a firm will pay a dividend of $1.00 next year and $1.20 the following year. At the end of the second year, the expected price of the shares is $22.00. If the required return is 14%, what is the current value of the firm’s shares?

A)   $18.73.

B)   $15.65.

C)   $19.34.

 

Q4. If a stock expects to pay dividends of $2.30 per share next year, what is the value of the stock if the required rate of return is 12% and the expected growth rate in dividends is 4%?

A)   $28.75.

B)   $29.90.

C)   $19.17.

 

Q5. An analyst has compiled the following financial data for ABC, Inc.

ABC, Inc. Valuation Scenarios
Item	Scenario 1	Scenario 2	Scenario 3	Scenario 4
Year 0 Dividends per Share	$1.50	$1.50	$1.50	$1.50
Long-term Treasury Bond Rate	4.0%	4.0%	5.0%	5.0%
Expected Return on the S& 500	12.0%	12.0%	12.0%	12.0%
Beta	1.4	1.4	1.4	1.4
g (growth rate in dividends)	0.0%	3.0%	Years 1-3, g=12.0% After Year 3, g=3.0%	Year 1, g=20% Year 2, g=18% Year 3, g=16% Year 4, g=9% Year 5, g=8% Year 6, g=7% After Year 6, g=4%

What is the value of ABC, Inc.'s stock price using the assumptions contained in Scenario 4?

A)   $26.66.

B)   $22.22.

C)   $18.52.

 

Q6. Deployment Specialists pays a current (annual) dividend of $1.00 and is expected to grow at 20% for two years and then at 4% thereafter. If the required return for Deployment Specialists is 8.5%, the current value of Deployment Specialists is closest to:

A)   $33.28.

B)   $28.27.

C)   $30.60.

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